SMSF purchase leasehold premises without borrowing

SMSF purchase leasehold premises without borrowing

SMSF purchase leasehold

Ownership by freehold and leasehold of a property are both defined as business real property. An SMSF purchasing a freehold business and leasing the business real property to a related party business, can be achieved. The SMSF can purchase leasehold premises without borrowing.
For example would be a business which includes all the additional fixture that were added when the business was established years ago + any new improvements. The current business pays rent of the commercial premises to the landlord, and the SMSF can purchase this leasehold business, which includes furniture & fixtures, then sub-lease the commercial premises back to either a related party business or a non-related 3rd party. The lease agreement would be transferred from the current business to the SMSF. Another commercial lease agreement from the SMSF to a new business owner would be made at commerical terms.

Some important points need to be considered when an SMSF purchases leasehold premises without borrowing, to ensure compliance at start and continuing on.

The points of concern (where the SMSF is not borrowing to finance the arrangements) are:-
1. The investment strategy must contain a reasonable argument that the investment is sound and suits the retirement needs of the fund’s members and resources of the fund etc.
2. The investment must be for the sole purpose of providing retirement or death benefits for the fund’s members: the motive must not be for example, to provide a job for a member of the fund or a related person (although that could be an incidental result of the arrangement, and recent changes make this easier).
3. All transactions must be at “arm’s length” (market value and proper wage rates).
4. The transaction should be carried out in such a way as to avoid any related party transaction which is not permitted by superannuation law.
5. Proper arrangements should be established to provide records of all investment decisions, fund resolutions, and transactions to demonstrate compliance.

For further discussion at Aussie Legal go HERE


About SuperBenefitnews

Self-Managed Superannuation Service Providers in Australia. SuperBenefit provides a wholistic SMSF assistance, education and administration service continuum - 1. “assistance” is help of whatsoever nature where our overall SMSF experience and knowledge enables us to provide assistance/help without any legal (or “license”) limitations. 2. “education” involves providing knowledge through teaching, coaching and mentoring about all matters SMSF, including (but not limited to) investment issues such as equities and property, 3. “administration” encompasses all admin aspects of legally required SMSF trustee and member record keeping including (but not limited to) audit and ATO matters. In keeping with our key point that SuperBenefit does not provide Financial Advice, where issues arise from 1, 2, and/or 3 above Indicate a need for a legally authorized provider (such as a Financial Adviser) and the client does not have their own service provider, the client can utilize SuperBenefit’s ‘Connect Assist’ … SuperBenefit, in itself, does not provide Financial Advice, but it does provide the wherewithal for great SMSF service. WE do not provide Financial Advice or any other service that requires a legally authorized provider. However, where such advice or service is required we have our ‘Connect Assist’, a SuperBenefit resource we use to connect clients to a Licensed Advisor or other legally authorised service provider. Call us 0407 361 596, no obligation FREE Connection call to see how we can help you!
This entry was posted in SMSF Investing, SMSF Property, Super Law & Compliance and tagged , , , , , . Bookmark the permalink.

2 Responses to SMSF purchase leasehold premises without borrowing

  1. Business real property is defined as any freehold or leasehold interest of the entity in real property. The real property is used wholly and exclusively in one or more businesses. The SMSF can purchase leasehold premises without borrowing.


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